Tax Memo – Time For An End-Of-Summer Tax Checkup To Avoid Surprises Next Year

RED BANK, NJ — I encourage taxpayers to consider using the end of the summer to make tax withholding or payment updates to avoid a potential surprise next year at tax time.

While most taxpayers get a refund after filing their taxes, many also find they unexpectedly owe taxes. This can be due to a life or job change for which they did not make the necessary tax adjustment during the year.

Those who should be especially careful are:

• Business Owners (S Corp, C Corp, Partnership, Schedule C)
• Anyone earning income not subject to withholding. (Interest, Dividends, Capital Gains, Rental Income)
• Gig economy workers.
• Those with a “side hustle.”

These individuals should check the amount they pay, or the amount of tax they have withheld throughout the year, to bring the tax they pay closer to what is owed. My expert team can help you align your tax withholding or tax payments with what you owe.

Remember, tax planning now saves time and frustration and PENALTIES AND INTEREST later.

My team is ready to assist!

Here are some important things to keep in mind:

How refunds work

The federal tax system is pay-as-you-go. Taxpayers pay tax as they earn wages or receive income during the year. For many, taxes are withheld from their paycheck by their employer and then given over to the IRS on their behalf. Others, such as gig economy workers, make or should make quarterly estimated tax payments throughout the year to stay current. A refund normally results when too much is withheld or paid throughout the year.

Recent IRS statistics show that two-thirds of taxpayers received a refund so far in 2024. As of mid-May, nearly $270 billion in refunds went to taxpayers with the average refund just under $2,900.

Avoid an unexpected bill

On the other hand, many taxpayers end up with estimated tax penalties because they underpay throughout the year. The penalty amount varies but for some it can be several hundred dollars. Adjusting withholding on paychecks or the amount of estimated tax payments can help prevent penalties. This is especially important for self-employed people, including those in the gig economy, those with more than one job and those with major changes in their life, like a recent marriage or a new child.

With that in mind, I encourage everyone to contact me so I can check your withholding / estimated tax payment adequacy.

If a withholding change is needed upon completion of my analysis, you can adjust your withholding by submitting a new Form W-4 to your employer or pension provider. You can also adjust quarterly estimated tax payments as appropriate.

I remind people to especially check their withholding if there’s a major life change such as a:

• New job or other paid work.
• Major income change.
• Marriage.
• Childbirth or adoption.
• New home purchase.

Questions? Concerns? Call me on (732) 673-0510.

We are not just your CPAs in tax season.

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